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Morningstar runs the numbers

Lex Hall  |  15 Mar 2021Text size  Decrease  Increase  |  
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We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 12 March.

5-10 per cent

The amount by which shares could retreat in the short term given the extended optimism, says Andrew Mitchell, senior portfolio manager at Ophir Asset Management. “Timing for any pullbacks is always difficult to judge when it is sentiment based,” Mitchell. “We see such a pull back as a buying opportunity in our funds and a healthy occurrence for markets. We think it less likely that a major bear market is around the bend given the supporting backdrop to corporate earnings as the vaccines bring the virus under control, and central banks’ willingness to keep short-term and long-term interest rates lower for even longer in the absence of signs of inflation. This should support the attractiveness of equities relative to bonds for some time yet.”

More than doubled

The increase in the Australian 10-year Government Bond rate, notes Morningstar’s Matthew Wilkinson. “As economic conditions are in the early stages of improving, investors are starting to expect rising inflation, and this is materialising in the pricing of longer-dated bonds—for example, government bonds with a duration of at least five years and longer,” Wilkinson writes. “They do that by selling those bonds, which drives yields higher. This has resulted in the Australian 10-year Government Bond yield more than doubling—it has risen to above 1.60 per cent as at the end of February 2021 from 0.80 per cent in October 2020. Over the same period, US 10-year bonds have moved to 1.34 per cent from 0.65 per cent. These are eye-catching sell-offs by historic standards.


The gain you would have made by investing US$10,000 in the ARK Innovation Fund when it first began almost seven years ago. From its 31 October 2014, inception through 28 February 2021, ARK’s flagship fund, the ARK Innovation ETF (ARKK) gained 36.01 per cent on an annualised basis, notes Morningstar’s Ben Johnson. That is nearly 23 percentage points better than the Morningstar US Market Index and just over 21 percentage points ahead of the mid-cap growth Morningstar Category average. “In 2020, ARKK’s performance went from peppy to parabolic as the fund gained 153 per cent. A US$10,000 investment at inception would have been worth US$70,053 on 28 February 2021,” Johnson writes.

More than 30,000 points

The level that Japan’s benchmark Nikkei has surpassed for the first time in three decades, writes James Gard. Recent economic figures have inspired the stock market’s gains: while the Japanese economy contracted by 4.8 per cent in 2020, the fourth quarter growth beat expectations with a 3 per cent gain. This data helped the Nikkei breach 30,000 points for the first time since 1991. Unlike many developed markets such as the US, whose indices have hit record highs in recent years, Japan’s stock market is still off the peaks reached in the economic boom in the 1980s.

16 per cent

The federal deficit/GDP of the US reached about 16 per cent, the highest level in the country’s peacetime history (and the highest level in any year outside the World War II era), says Morningstar’s head of economic research Preston Caldwell. And 2021 is set to bring a near repeat of this record-shattering level of fiscal stimulus. “We project that the federal deficit/GDP will only slip to about 15 per cent. This incorporates our expectation that President Joe Biden’s proposed US$1.9 trillion ($2.5 trillion) stimulus plan is largely enacted in full,” writes Caldwell.

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is senior editor for Morningstar Australia

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